Senator Pushes to Ban Bankers From Fed Boardrooms

An outspoken Senate critic of
the Federal Reserve said on Wednesday that he would reintroduce
legislation to ban bankers from the boardroom of the 12 regional
Fed branches, citing potential conflicts of interest.

An outspoken Senate critic of
the Federal Reserve said on Wednesday that he would reintroduce
legislation to ban bankers from the boardroom of the 12 regional
Fed branches, citing potential conflicts of interest.

Senator Bernie Sanders, using JP Morgan Chase Chief
Executive Jamie Dimon to illustrate his point, called for a
prohibition on all financial industry executives serving as
regional Fed directors. Dimon stepped down from the New York
Federal Reserve board last month when his term expired.

"Jamie Dimon was the poster child for why we need to end the
serious conflicts of interest at the Fed, but he was not alone,"
said Sanders, an independent senator from Vermont. "Two-thirds
of the directors at the New York Fed are hand-picked by the same
bankers that the Fed is in charge of regulating."

On Sanders' Senate website, above the announcement that he
will reintroduce legislation, is a photo of Dimon with a
headline that reads: "Fox Guarding the Chicken Coop."

Public anger toward the Fed flared during the 2007-2009
financial crisis amid allegations that it had been too soft on
banks it was supposed to be supervising and failed to spot their
catastrophic gambles on the U.S. housing market.

The Fed argues regional directors provide the central bank
with invaluable insight into the health of the real economy,
while ensuring that policymakers hear a diversity of views -
not just those of economists.

However, the New York Fed has been criticized before for
perceptions of conflicts of interest. In 2009, its
then-chairman, Stephen Friedman, resigned after questions about
stock purchases of Goldman Sachs, his former firm.
The share buying took place after the New York Fed became
Goldman's regulator.

The Fed issued new guidelines governing directors following
that incident, and the New York Fed board is now chaired by
Metropolitan Museum of Art President Emily Rafferty.

Each regional Fed has a nine member board, comprised of
three different classes of directors - A, B and C - but only
class A directors can be bankers; the remaining members are
drawn from other walks of life. Two thirds of the regional Fed
directors are chosen by bankers, with the remaining third
appointed by the Fed Board in Washington.

"The CEOs of the largest banks in America should not be
allowed to serve as directors of the main agency in this country
in charge of regulating these financial institutions," Sanders
said in a statement. "The Fed has got to become a more
democratic institution that is responsive to the needs of the
middle class, not just Wall Street CEOs."